August 24 -The Battle Against Open Skies: What Would President Reagan Think?

INDUSTRY ANALYSIS

By Kevin Mitchell

After 2-1/2 years and tens of
millions of dollars wasted on lobbying, that understandably has failed to
persuade the Obama or Trump Administrations, in a Hail Mary pass that likely
would even have Aaron Rodgers shaking his head, Delta Air Lines has tried to
invoke the memory of Ronald Reagan. Andrea Newman, its SVP for Government
Affairs, did so in an August 22, 2017 Washington Examiner op-ed entitled, “Gulf
carrier cheaters threaten U.S. aviation jobs” in which she twice, in the first
paragraph, mentioned the former President and that she worked for him.

I did not know President
Reagan, nor did I work for him or purport to know what he would think about the
political campaign Delta, and its oligopoly partners American Airlines and United
Airlines (Big Three), are waging against Open Skies and the much-needed
competitive choice Emirates Airline, Etihad Airways and Qatar Airways (Gulf
Carriers) offer consumers.

However, the former President
might have responded to Newman’s op-ed as follows:

“Andrea, don’t you remember
the stark warning I gave in my August 2, 1986 radio address to the nation on
free and fair trade? Specifically, I emphasized: ‘And they [economists] all warn that high trade
barriers, what is often called protectionism, undermines economic growth and
destroys jobs. I don't call it protectionism; I call it destructionism.’

For 25 years the U.S. has provided
global leadership in air service free trade with our Open Skies policy. Countries
around the world have embraced it. The U.S. has been a beacon on the hill
for liberalization of global skies. Open Skies has spurred economic growth
and created and supported countless jobs just as I would have predicted. Now,
rejecting my vision of open markets, Delta wants the U.S. to repudiate Open
Skies and instead embrace destructionism? Very disappointing!

As I said in
my radio address, free trade and fair trade go hand-in-hand. I
understand Delta has competitive concerns about the Gulf Carriers and alleged
subsidies. If proven, that is a serious issue. But, why then has
Delta failed to file an International Air Transportation Fair Competitive Practices
Act (IATFCPA) complaint with the U.S. Department of Transportation (DOT)? Congress
enacted IATFCPA in 1974, even before I was elected and you served in my
Administration. Don’t you remember the IATFCPA complaint United filed in
June 1981, during my Administration, against the Japan Civil Aviation Bureau
and Japan Air Lines? DOT carefully reviewed the law and facts, and it
acted quickly issuing an order in December 1981.

Simply put, as in my Administration,
IATFCPA is the appropriate process where, as here, U.S. carriers believe
foreign competitors or their governments have engaged in unfair trade practices
that have result in commercial harm. You cannot, and should not,
cavalierly brand your competitors as “cheaters” or tell every U.S. Government
official you see that Gulf Carriers are unfair competitors if Delta is
unwilling or unable to prove your allegations to the U.S. Government in an
IATFCPA case. That’s how we did it in my Administration and I fail to see
why it should be any different now.

On the issue of IATFCPA, can you
please help me understand something. You claim Delta is suffering
competitive harm as is required to successfully make an IATFCPA
case. However, your President, Glen Hauenstein, in a July 15, 2015
earnings call, unequivocally told Wall Street analysts Delta is not. The
transcript of what Mr. Hauenstein said in that Wall Street call is crystal
clear, irrefutable. So, who’s right, you or Mr. Hauenstein? Delta’s record
setting profits – congratulations by the way – strongly suggest Mr.
Hauenstein is correct. Is that why you have not filed an IATFCPA
complaint?

I also am confused by your repeated
claim that each Big Three flight canceled costs 1,500 U.S. jobs. Unless I am
mistaken, during the Obama Administration, you and your partners claimed it was
800 jobs. Now, that same figure is 1,500? We saw hyperinflation in
the Carter years but even by that standard this seems off the charts – a near
doubling of your job loss claim in two years!?

On that subject, does it apply to all
cases where a foreign carrier operates a flight rather than Delta, American or
United? For instance, Delta recently gave its Seattle-London Heathrow
daily flight to your partner, Virgin Atlantic. Did that Delta decision
cost 1,500 jobs? How about when Delta decides to have your joint venture
partner Air France/KLM operate a flight rather than fly a Delta
aircraft with Delta crew? Do each of those flights also cost 1,500 U.S.
jobs?

On that point, when you cancel a flight like
Atlanta-Dubai, Delta does not park the aircraft in the desert
and furlough the crew and support staff, correct? The same is true for
United’s aircraft and crew supporting its now canceled Washington Dulles-Dubai
flight, right? Instead, as businesses with a legal duty
to maximize earnings for your shareholders, those aircraft were redeployed
to the more profitable transatlantic market where the Big Three and their
foreign partners control more than 80 percent of the seats and have pricing
power. Since obviously those redeployed aircraft do not operate without
crew and support staff I don’t understand your job loss claim whether the
alleged number is 800 or 1,500.

Let me add while Delta’s words of
concern about U.S. jobs are music to my ears, Delta’s actions in aircraft
purchases – aerospace is a key engine for U.S. manufacturing jobs – are
terribly disappointing. Recently, your CEO publicly declared that the
Rolls Royce-powered Airbus A350-900 is Delta’s flagship aircraft. Not a Boeing?
Not GE powered? Why hasn’t Delta purchased a single Boeing 777X? Gulf
Carriers have purchased a lot of them ensuring that Boeing was able to
launch the 777X program, and is able to deliver hundreds of thousands
of jobs to U.S. manufacturing workers.

And then there is Boeing’s unfair
trade practices complaint against Bombardier that the Trump Administration is
investigating for heavily subsidized C Series aircraft purchased by
Delta. It is good to talk about U.S. jobs but it would be far better if
Delta took actions, like aircraft purchases, that support rather than
harm U.S. manufacturing jobs. As Mark Twain famously said, ‘action
speaks louder than words but not nearly as often.’”